Spiraling upward: Auditing methods as described by Montgomery and his successors

              The Accounting Historians Journal Vol. 12, No. 1 Spring 1985
John H. Myers INDIANA UNIVERSITY
SPIRALING UPWARD: Auditing Methods As Described By Montgomery And His Successors
Abstract: Audit emphasis this century has swung away from chasing entries through the books to values being "fairly presented" and then back again. Now, however, what was "chasing entries through the books" has become "verifying internal controls." This verification is primary evidence that statement values are fair, and comparison of values to "things themselves" is corroborative evidence. Thus, auditors have not gone around in a circle, but in a radically changing en-vironment they have spiraled upward. These conclusions are drawn from a review of the nine editions of Montgomery's Auditing published through 1975 and from the two editions which Montgomery prepared of the Authorized American Edition of Dicksee's Auditing.
A 1950 list of auditing methods by the American Institute of Ac-countants (now AICPA)1 included (a) analysis and review, (b) ob-servation, including both observation of physical assets and of how clerical employees do their work, (c) confirmation, (d) inquiry, and (e) computation. Compare, cross-reference, examine, investigate, scan, and trace might be added as subitems in the major list. These words also appear in the auditing literature of the early 1900's and of today, but today do we do these things differently? The changed environment of larger masses of data, new means of handling them, increased audit responsibilities and greater understanding, have led to many changes in the use of these methods. Early in the cen-tury they were used primarily to trace transactions through the books. Later the emphasis changed to according the account bal-ances with the "things themselves." Now the audit focus is on the integrity of the system for getting the transactions into the financial statements, while additional balance sheet auditing assures that ac-count balances accord with the "things themselves."
This analysis of history is based on the nine editions of Montgom-ery's Auditing plus the two editions of the Authorized American Ver-sion, which Montgomery prepared, of Dicksee's Auditing. In addi-